South Africa trip notes: BRICS+ takes on greater prominence / Yaroslav Lissovolik

In mid-May South Africa hosted the BRICS Academic Forum in Cape Town, where discussions focused on the most pressing issues on the BRICS agenda such as the modalities of BRICS-Africa cooperation, including through the advancement of the African Continental Free Trade Area (AfCFTA). Perhaps the key message that came from the Forum was the call for collective action and cooperation not only among the BRICS economies but also with the wider BRICS+ space of the Global South. In particular, regarding the attainment of SDGs commitment to multilateralism was termed as being crucial, with South African representatives calling for building a “developmental trajectory with a human face” in which “no small country is left behind”. Clearly the BRICS+ framework within the BRICS academic discussions is taking on greater prominence, with the participants of the Forum calling for more academic work to be undertaken on the modalities of BRICS+ going forward.

With respect to the possibilities for BRICS contribution to the success of Africa’s flagship project, the creation of the AfCFTA, participants noted the criticality of greater investment and technical assistance to come from BRICS to African countries. But perhaps the most important contribution that BRICS could deliver to AfCFTA’s success is via providing greater market access by lowering import duties and non-tariff barriers on African exports. There is tremendous scope for a coordinated reduction in trade barriers on the part of BRICS with respect to Africa as some of the BRICS economies still have average import tariffs on agricultural goods in excess of 35%. This creates scope for trade liberalization that vis-à-vis Africa could be far more significant than in the case of Western economies where import tariffs are significantly lower. Greater market access is a key competitive edge that BRICS can wield via-a-vis Africa compared to the developed economies – to a far greater degree than in areas such as technical assistance, where leading Western economies and Bretton Woods institutions arguably still have a significant edge.

What is even more important, most BRICS economies currently conduct their trade policy via their priority regional integration arrangements – Russia via the Eurasian Economic Union, South Africa via SACU, SADC and AfCFTA, Brazil via MERCOSUR. What this means is that coordination of market liberalization from BRICS to Africa will necessitate the use of a BRICS+ format in which AfCFTA cooperates in the same inter-regional platform with the respective BRICS regional integration arrangements such as MERCOSUR, Eurasian Economic Union (EAEU) and others. This in turn implies that greater trade liberalization vis-à-vis Africa will come not only from the BRICS core members, but also their regional partners in the respective trade arrangements. The platform that brings together the main regional integration arrangements of the Global South denoted as BEAMS would provide for the possibility of market openness from dozens of members of these respective regional blocks – BIMSTEC, EAEU, AfCFTA, MERCOSUR, SCO. This is the “multiplier effect” of BRICS+ in terms of trade liberalization that can be prioritized vis-à-vis African economies.   

Greater market access coming from BRICS to Africa will go a long way to correcting the current trade imbalances in the world economy, whereby there is lower than potential South-South trade (including among South-South regional partners) compared to the trade conducted by developing economies with the West. The BRICS+ multiplier in the BRICS-Africa trade liberalization could also serve as an important stepping stone to the formation of a free trade area across the Global South. Finally, greater market access coming from BRICS to Africa could be a powerful trigger to boosting not just trade and investment, but also the use of national currencies.  

The theme of the use of national currencies and the possibility of the formation of a common BRICS currency was discussed at the Forum, but in light of how topical these issues are now in the context of the upcoming BRICS summit discussions this year, there could have been greater focus on these crucial themes. In the context of the emphasis placed by South African representatives on the creation of a diversified financial system for attaining greater sustainability in economic development, I argued in my presentation that de-dollarization and the creation of a common BRICS currency could be among the measures that could prove conducive towards a more stable and diversified financial system across the Global South.

Another possible measure in this respect could be the formation of a platform for the largest commercial banks of the BRICS countries that would complement the platform for national development banks that currently exists under the aegis of the BRICS New Development Bank. Such a platform for the leading commercial banks could bring together the Bank of China, State Bank of India, Sberbank, Banco do Brasil, and Standard bank. Such a platform could promote the financial presence of BRICS countries’ commercial banks in the respective BRICS financial markets as in most cases it is primarily the Chinese banks that have a greater presence in the markets of the Global South – in the case of Sberbank for example after extended periods of painful soul-searching in Europe and experimenting with Agile organizational structures it is yet to become agile in emerging markets and launch its commercial presence in either China or the majority of other BRICS markets.

With respect to the financial sector a key concern raised in the Forum was the issue of capital outflows from developing economies – something that is part of the problem (referred to as the Lucas paradox) of net capital flows being directed from the developing to the developed world rather than the other way around: it is the faster growing developing economies that should be getting the capital flows from the advanced countries. My view is that these concerns could be addressed via the strengthening of BRICS CRA and expanding its mandate to strengthen the macroeconomic framework in the Global South. This could be further buttressed via forming a platform for regional financing arrangements (RFAs) in which BRICS countries are members. BRICS CRA could perform a coordinating role for these RFAs in mobilizing resources for ensuring macroeconomic stability in the developing world. De-dollarization, greater use of national currencies and deeper BRICS financial markets may also be among the elements of resolving the Lucas paradox.

There may be other platforms in the BRICS+ financial space directed at the attainment of SDGs such as a platform for the regional development banks in which BRICS countries are members. Such a platform could bring together the Eurasian Development Bank, CAF, FOCEM, SDF, other regional development institutions as well as the BRICS New Development Bank as a coordinator of such an alliance of BRICS+ development banks/funds. Such a platform could mobilize resources that are sizeable enough to conduct key development projects across the Global South – according to the IMF, the resources of the regional development institutions in the global economy are greater than those of the IMF and the World Bank.

In the end, however, the undertakings by BRICS might not succeed if there is no ownership of the developmental goals of BRICS and more broadly the BRICS+ economies. In this respect, it is important for the consolidated voice of the Global South to be heard across the world on key international issues, including on the priorities of economic development. The opinion polls that make it into the media space are predominantly from the developed economies – perhaps there could be scope to create a network of BRICS+ leading polling agencies that would provide the views of the population in the developing countries separately or on a consolidated basis. Such a network may be denoted as “BRICS Pulse” and could make the voice of the Global South community heard globally; it could also serve as an important benchmark for policy-makers in the BRICS+ economies. At this crucial juncture in global development BRICS+ needs a more rhythmic and faster pulse that is heard from all over the vast expanses of the Global South!

Origin: https://bit.ly/3BTvAb0